House passes

 student loan crackdown bill

The bill tackles conflicts of interest in the $85 billion student loan market amid widening scandals.

The U.S. House of Representatives overwhelmingly passed a bill Wednesday cracking down on conflicts of interest in the $85 billion student loan market amid a widening scandal.

Adopted by a 414-3 vote, the bill would require colleges and lenders to abide by new codes of conduct; ban gifts from lenders to college aid officers; require disclosure of college-lender relationships; and protect students from aggressive marketing practices.

Investigations by Congress and New York Attorney General Andrew Cuomo have accused lending institutions of providing pay and perks to college financial aid officers in return for being put on "preferred lender" lists shown to students looking to borrow money for their education.

Allegations have also emerged of questionable stock dealings involving lenders, financial aid officers and one employee of the U.S. Department of Education, which oversees the nation's complex student financial aid system.

"Corrupt practices among lenders, schools, and public officials have undermined our student loan programs," said House Speaker Nancy Pelosi in a statement, calling the bill a needed action to clean up the student loan industry.

Under the measure, "preferred lender" lists would not be banned but would be more tightly regulated, while ensuring students have access to lenders not on the lists, as well.

House Education Committee Chairman George Miller told reporters after the vote that the bill - known as the Student Loan Sunshine Act - will help restore student loan ethics.

Miller said he hoped the Senate will move swiftly to adopt a similar bill so a measure can be sent to the White House. If the Senate moves slowly, he said, "I would be concerned" because of continuing revelations of student loan misconduct.

California Rep. Buck McKeon, senior Republican on the House Education Committee, said, "We do need to reaffirm our trust in the system. I believe this bill does just that ... I'm hopeful the other body will pick up this legislation."

Edward Kennedy, chairman of the Senate Education Committee, said there is bipartisan agreement on a Senate package of student loan industry reforms that he expects to include in an upcoming Higher Education Act reauthorization bill.

"These reforms will include many of the measures included in the version of the Sunshine Act I introduced in February, including a ban on lender gifts, reform of 'preferred lender lists,' and disclosures to make ... education loans more transparent," said the Massachusetts Democrat in a statement.

In the House, Texas Democrat Ruben Hinojosa called the passage of the Sunshine Act "a very important first step."

Some congressional Democrats want further reforms, including a measure to channel more students into direct government loans and away from federally guaranteed loans.